We fear missing out on something

The headquarters of Intermarine Inc. exist in New Orleans in name only.

The company's chief executive, chief financial officer and most of its senior staff live and work in Houston. Most of the company's clients are in Houston, too.

"The official headquarters is in New Orleans. There is no desire to change the headquarters," said Mike Dumas, the company's chief financial officer. "But now most of our employees are in Texas. Most key personnel is in Texas, and we're hiring mostly from within the Texas area. At the end of the day, we have to attract high-quality employees who are comfortable with the living environment."

In order to do that, the company has slowly and relatively quietly moved its base of operations to the neighboring state.

Intermarine is one in a long list of companies that -- citing concerns about infrastructure, corruption, crime, taxes and work force -- have shifted operations from the metro area. Katrina exacerbated those pre-existing issues.

Since 2005, the New Orleans area has lost nearly a dozen publicly traded companies. Among them is Ruth's Chris, which moved its headquarters to Orlando, Fla., after Hurricane Katrina devastated its Metairie headquarters and its local restaurants. Freeport-McMoRan Copper and Gold moved its headquarters to Phoenix. And International Shipholding Corp. moved its longtime Poydras Street headquarters to Mobile.

Still, business leaders are hopeful that the city will seize on what they believe is a unique opportunity to transform the way it retains and recruits businesses.

"There has to be a focus on business retention," said Gregory Rusovich, president of shipping and maritime logistics company Transoceanic Shipping Company Inc., and a member of the Business Council of New Orleans and the River Region. "We can't afford to lose more businesses." 

Katrina made it worse

Before Katrina, the metro area's job base was flat. From 1999 to 2004, the five years before the storm, average monthly nonfarm employment in the metro area fell from 616,000 to 614,000, a drop of about 0.3 percent.

Katrina made things worse. For the first nine months of this year, average monthly nonfarm employment has been closer to 501,000, according to the U.S. Bureau of Labor Statistics. There is concern that number will again plummet as the recovery wears on and the large number of available construction jobs begins to thin.

It's not difficult to make a case for business retention and economic development. Businesses increase available jobs and employment. More opportunities for employment increase the population. A larger employed population generally leads to a greater tax base, which can improve overall quality of life in an area.

"If you're not focused on economic development, then you might as well be focused on poverty programs. Without any job creation, those who can move will move to find better economic opportunity," said Ivan Miestchovich, director of the Center for Economic Development and an associate professor of finance and urban and public affairs at the University of New Orleans. "Without a focus on economic development, you are basically condemning the area to a steady decline. At some point it becomes, last one out, turn out the light." 

Problem has been around

To some degree, that process had already started to happen here. The reasons for business flight run the gamut from long-standing issues such as crime, a poor educational system and perceived or actual corruption to a feeling among business leaders that their needs are neglected.

Tidewater Inc. Chairman Dean Taylor said the company had been considering a move to Houston because New Orleans has lost its place as the leading location for "intellectual creativity" in the energy industry. The company announced Wednesday that it would stay in the city.

"The challenge is for our management group. We fear missing out on something because we're not in the hub of activity," said Taylor, who also is president and chief executive of the offshore oil and gas transportation firm. "Our personal loyalties are with the city, but professionally we would be blind to ignore the opportunities in Houston."

Dumas of Intermarine said more should be done to make the state's tax laws more business-friendly.

"There is a state income tax in New Orleans that is regressive, whereas in the state of Texas the personal income tax is more accommodating, which makes it more advantageous to operate there," Dumas said.

Meanwhile, Rusovich believes that the city's permitting process is bureaucratic and that zoning ordinances are "cumbersome and unclear."

He also said political leaders do not make enough of an attempt to reach out to business leaders. That complaint is a common one.

"There's not an aggressive reaching out. We have to reach out to them. It's not the other way around," Rusovich said. "City Hall historically has not reached out to business. The way to reach out is to go to a CEO and find out what the concerns are and how they can do better."

The mayor's Office of Economic Development and the quasi-private economic development agency GNO Inc. are tasked with addressing business needs and building the business community. Both have been roundly criticized as ineffective.

Earlier this year Councilwoman Stacy Head gave the city an "F minus" on its ability to meet the needs of the business community. The city's director of economic development, Donna Addkison, stepped down in August, leaving the office with only an interim director who also oversees another department.

"On the local level, the city of New Orleans, the Mayor's Office of Economic Development, has been dysfunctional since its inception. It just hasn't been effective," Miestchovich said. "I can't point to one real professional, real economic developer that has headed up that office -- and that's pretty bad."

Meanwhile, GNO Inc., even before Katrina, was failing in its attempt to create 30,000 new jobs in five years, the goal it had created for itself when the group began in 2004. The agency's operation suffered pre-Katrina because GNO Inc.'s role within the 10-parish region lacked definition, said Barbara Johnson, the agency's chief operating officer.

"I think there was room for clarification, definitely," Johnson said. "So, we've been working hard with our partners to do that. We have clarification on our role and there is emerging clarity."

Beyond that, the city has lacked a long-term growth strategy for the business community. And the region has failed to take a long-term approach to economic development, some say.

"When you hear people talk about economic development, someone wants you to come up with a magic bullet, a BMW plant in Harahan, for instance," said Peter Ricchiuti, assistant dean at Tulane University's Freeman School of Business. "That's great. But it's not what needs to be done." 

Some effort put forth

To be sure, there has been evidence of a willingness to address business needs. Politicians and business leaders rallied to push for Louisiana to change its tax code to eliminate what amounted to a double tax on companies headquartered in Louisiana with subsidiaries elsewhere. The move came after publicly traded Pool Corp. of Covington said it was considering moving its headquarters and about 200 employees to Florida.

Before the change, companies like Pool paid Louisiana taxes on their operating income as well as on nonbusiness income -- such as interest, dividends or capital gains -- produced by out-of-state subsidiaries. Many states also tax a portion of that nonbusiness income, meaning that the Louisiana companies are taxed twice.

The requirement eventually was waived for Pool and the change subsequently extended to all Louisiana businesses with operations elsewhere.

"The issue was raised, addressed and fixed," said Manuel Perez de la Mesa, president of Pool, which is a wholesale distributor of outdoor products. "It certainly caused some anxious moments for some employees in our Louisiana office, but at the end of the day, no harm, no foul." 

'Will isn't often there'

Even Perez admits that galvanization is a rarity. The metro area suffers from "short-sighted policies" that hamper business development, Perez said.

"My outside perspective is people in Louisiana are very much engaged in talking about things but not to actually doing it," Perez said. "The will isn't often there."

To build the business community, leaders say, the city needs to make progress on addressing the long-standing, long-term issues of crime and education. A growing group of business leaders is pushing the city for a more immediate response: removing itself from the economic development process altogether.

"For the city going forward, it needs to reinvent the way it has done business," Miestchovich said. "That doesn't mean fixing the Mayor's Office of Economic Development, it means abolishing it."

Miestchovich and others are championing, instead, a long-term public-private partnership whose sole job would be attracting business investment to the area. The group would be less influenced by local politics because its leaders would not be appointed by changing mayoral administrations.

The idea models those instituted in Charleston, S.C., Charlotte, N.C., and Miami, cities that have transformed through economic development. But it can be difficult for local politicians to relinquish complete control of economic development efforts.

"It requires a sharing of political power and so only far-sighted true political leaders that are looking for the long-term good of the community are willing to take the steps like that," said George Wentz Jr., an attorney and co-founder of the Horizon Initiative, which is pushing to establish a public-private economic development entity in New Orleans.

Ricchiuti regards New Orleans, where politicians and not the business leaders have the most muscle, as somewhat of an oddity.

"Almost all major U.S. cities are controlled and directed by the business community. New Orleans is the only place I know of major size that government (officials) are the major players," Ricchiuti said. "It's a very odd town in that the business community doesn't call the shots here."

The idea of restructuring economic development outside City Hall is not new to New Orleans. But the numerous plans suggesting similar changes often never make it to the implementation stage, Rusovich said. He believes government has gotten in the way of economic development.

"Five, 10 years ago, there were some great plans floating around," Rusovich said. "I believe as far as why they weren't implemented, it's politics. Something gets presented during one administration and then another doesn't pick it up. A good solid plan has never been institutionalized." 

Business climate studied

Both GNO Inc. and the city are taking steps to change that.

GNO Inc. is "working on a regional business investment strategy that has forced us to roll up our sleeves and have a focused game plan," Johnson said.

The agency has commissioned the Austin, Texas, firm AngelouEconomics to study the region's business climate. A report released this month named international commerce, energy, aerospace and defense manufacturing, and creative media as sectors the region should focus on. A second study, to be released in a few months, will discuss how to improve those industries.

"Our plan is to galvanize a leadership group, working with parishes and the business community and the World Trade Center, to get a clear action plan outlined," Johnson said. "I think GNO Inc.'s role moving forward is to be a major player in working with other associations in putting together a powerful marketing campaign for the region."

Johnson said she sees GNO Inc. as the lead agency in business recruitment. The individual parishes, she said, should be responsible for issues related to business retention, though the groups would work jointly on issues that affect the business climate, such as public policy.

"All the economic development organizations are investing in GNO Inc., recognizing that there needs to be a quarterback that galvanizes the resources, the assets, the unified voice to powerfully communicate the business proposition, the case for doing business in the region," Johnson said. "That really, post-Katrina, is what our job is about. More than ever, it's critically important that we figure out how we leverage and connect and speak with one voice as a region to make this place one of the best places to do business."

Meanwhile, the city's Office of Economic Development is being restructured to fall under the purview of Recovery Director Ed Blakely's Office of Recovery Management. The office will propose a plan to the City Council this week that pushes for the creation of a public-private partnership to lead economic development efforts in the city, Blakely said.

"We haven't had economic development in the city in the sense that I think of economic development," Blakely said. "We have had funded projects, not a long-term strategy."

The public-private entity would act as the go-to agency for business retention, recruitment and development, and the restructured city Office of Economic Development would help to facilitate its needs in that process, Blakely said.

There are other positive signs. Business leaders point to the election of Gov.-elect Bobby Jindal as good for the business community. Ricchiuti, meanwhile, points to the consolidation of the assessors' offices and the levee district and the streamlining of the courts as business-friendly moves.

"Those are things that build long-term business confidence," Ricchiuti said. "I really think in the long run that kind of thing is going to pay long dividends. Long-term, that stuff is really going to make people think, 'I'm going to give this a try, it's a different place now.'¤"

But Taylor, who said he has received telephone calls from Sen. David Vitter, Mayor Ray Nagin and other local leaders urging him to keep Tidewater here, worries that those changes are too little, too late.

"Sometimes the momentum has flung so far in another direction, it's tough to counter it," Taylor said. "People say, 'Stay because it'll be good for New Orleans.' But I have to do what's best for the company. If we have a city that's pro-business, an intellectual bed of creativity, then heck, it's great for our company to stay in New Orleans. But as it stands, New Orleans is becoming a backwater, at least for intellectual creativity in the oil industry.

"It just seems that the city is bogged down in stuff. The city seems to have a hard time getting out of its own way," Taylor said. "Other cities seem to be doing a much better job of attracting business and retaining the businesses they have. Atlanta and Houston are two that come to mind immediately." 

Seeking role models

In fact, Taylor and others hope New Orleans will look to those cities and others as models. The Horizon Initiative has partnered with the Santa Monica, Calif., research firm Rand Corp. to study which cities can be models for this area's economic development comeback. The study will be released this week.

"We need to step back, but with a sense of urgency. We need to analyze best practices in other cities," Rusovich said. "And we need to quickly put together a center that focuses on economic development. Once that's done, and it should be done quickly, I think we need to quickly put together a strategic plan." 

Jaquetta White can be reached at jwhite@timespicayune.com or (504)¤826-3494. 
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